Making Segmentation Work For Your Business

One of the fundamentals of marketing is that a brand cannot be “all things to all people.” To optimize efforts and profitability, sales initiatives need to be sharply focused on those demand-side market targets that are most inclined to buy your product or service. Market segmentation research is used to gain in-depth understanding for identifying and partitioning markets (consumers, customers, etc.) into distinctly different, potentially targetable subgroups or segments.

There are many ways to segment a demand-side market, be it consumers or commercial business customers/prospects. Quantification of and solid insight into what drives demand side segments to make specific category or brand choices is often more enlightening and reliable for predicting and understanding success than demographics or life stage.

Mindset, beliefs, personal interests, category-related attitudes, benefits sought, and need states are often far more impactful drivers of demand side choice than product/service usage patterns and frequencies or demographics.

To ensure segmentation actionability, our preference is to focus the segmentation on the hierarchy of choice drivers that has been analytically identified.

Segmentation based on attitudes, needs, and underlying motives is usually the most compelling. Differences in these factors usually drive differences in brand preference, brand purchasing and adoption, making for a much more actionable segmentation schema and communications platform.

Segmentation research is sometimes criticized for not being actionable because it may lack information key to in-market activation: It could be a strong segmentation analysis, but it lacks enough information to either prioritize the segments or how to reach them. Here are some tips from our playbook to help make your next segmentation project more actionable:

Discuss and clarify business objectives with the brand team and management. Everyone needs to understand and agree on concrete business objectives before designing and conducting any segmentation initiative.

Know your stakeholders. How will team utilize their enhanced demand side market knowledge? Being able to present the segmentation effectively means understanding who stakeholders will be and how they will subsequently act on the segmentation insights.

Decide what behaviors you are looking to drive. Do you want repeat purchase from existing customers, acquisition of new purchasers? Or are you looking to extend existing brands to new demand-side targets? Be clear on your strategy before embarking on this research.

To get the most out of your segmentation research, be sure you’ve nailed down the driving impetus for it. Is it:

A need for strategic response to external changes, innovations, new trends, or threats from key competitors in the market landscape?

The resulting study design will incorporate the most relevant sample structure/composition as well as the metrics, analytics, and insights needed to inform and direct business actions to successfully achieve business objectives.